New Reasons for Onshoring

Deep in the hearts of local economic development people everywhere is the hope that maybe, just maybe, jobs that have been outsourced to other countries will come back. It’s called “onshoring,” the idea that local companies who opened factories in other parts of the world will say, “this isn’t working…I’m going back to the old way of doing things.” Or rather, “I’m going back to the old place where I used to do things: the U.S.!”

But one of the newest reasons for this trend has nothing to do with our labor costs or quality issues. Rather, it’s the fact that workers here don’t get shot at.

The battle between drug traffickers and the army near the city of Monterrey last week was the sort of violence that is frightening U.S. companies away from new investments south of the border, where organized criminals are increasingly turning to kidnappings, extortion and cargo thefts despite a government offensive against drug cartels…As a result, only half of the U.S. firms surveyed recently by the U.S.-Mexico Chamber of Commerce said they would go ahead with new investment plans in Mexico and several companies, including Whirlpool Corp., have recently announced they would put new factories elsewhere citing concerns about safety.

Now, I’m not celebrating drug violence in Mexico, or promoting it as a good regional economic development strategy for the central Puget Sound. But it just goes to show you that there are all sorts of reasons why companies might decide that lower costs aren’t all they’re cracked up to be. For example, when GM Nameplate was talking about leaving Seattle, I noted that they were not only looking to stay in the region (Kent) but that they were pulling back outsourcing from China because of a lack of supply of talented workforce.

For the Seattle region’s economy as a whole, one positive note is that Root is thinking of the new facility as a point of consolidation for other GM Nameplate operations.

The company currently operates a factory in Dong Guan, in the heart of China’s Pearl River manufacturing zone. But a combination of rising costs and difficulties in keeping a steady cadre of middle managers there means that the company now intends to keep work in the U.S. that it had planned to send offshore. (emphasis added)